Creating Wealth Read online

  3. Technological Capital

  Technological capital includes the ways in which communities harness their intellectual resources to create tools, systems, machines, arts, skills and materials that are designed to improve our lives. Building on our capital in this area means supporting the education, creativity and access to materials that are required to create innovative technologies. For example, in a depressed township in South Africa, a young man who was educated in physics has developed an idea for a solar and bicycle powered battery charger — many of the people in the settlement use car batteries to power their homes’ electrical needs. If he can gain access to the materials he needs to develop the new system, his good idea — which would generate income in an impoverished area, provide low-cost energy to the people in the community and reduce CO2 emissions all at the same time — might succeed.

  Social and Cultural Capital

  4. Social Capital

  The concept of social capital recognizes the economic importance of all the ways we are connected to each other: the relationships, networks and values we share and the cooperative systems we use for interacting. The sum of social capital is the capacity for successful and effective collective action. When we’re thinking in terms of how social capital produces additional social assets, we need to be mindful of all the ways that we can enhance the connectedness of our communities. When we’re developing other strategies, we need to be careful not to do things that inadvertently rob our community of these connections. It’s also important to avoid a situation where the social capital in one sector of the community works against the ability of other sectors to have connections with the community as a whole — the bonds between members of the local mafia could be called a form of social capital, yet its role in the community does not enhance other social assets.

  5. Historic and Cultural Capital

  Our community’s historic and cultural capital are the historic resources we have that could be developed into tourist attractions, the cultural centers that celebrate our music, art, drama, dance and other creative endeavors, the programs in place to build and transmit our cultural understandings to others. To build and maintain historic and cultural capital involves a multifaceted approach that strengthens leadership qualities, enhances the built environment where cultural activities can happen, fosters creativity and talent, treasures historical records and information and promotes tolerance and respect for differences. The creative economy has now surpassed the traditional manufacturing sector in the United States, so the role of cultural capital is more important than ever.2

  Human Development

  6. Human Capital

  Our human capital includes all the capabilities that people have to learn, to invent, to create, to work, to care for each other and to contribute to the community as a whole. To strengthen the human capital in our communities we need to develop strategies that increase capabilities on every level. People who live up to their potential enhance their lives and the life of their communities. Maintaining these capabilities also involves developing systems that enhance wellness, and that care for people who are sick, physically and mentally challenged, or, for example, too young or too old to care for themselves. It means building the caring capacity of our communities, so that people feel a sense of belonging and mutual support where family relationships and social networks are healthy for the individuals in them. This form of capital used to exist more frequently in rural and small town settings.

  7. Institutional Capital

  A standard definition of institutional capital is hard to find — to some it means the financial resources controlled by key institutions and to others it represents the institutional framework governing the economy. For the purposes of this book, we define institutional capital as the structures, organizations, legal and financial frameworks that enable a society and an economy to function. This includes the legal system and the rule of law, the insurance system that helps communities manage risk, the systems that establish different exchange mechanisms (national and complementary currencies), the regulatory structures that protect the natural environment, human rights and human health and well-being and all the institutional arrangements that provide a foundation for economic activity.

  Economic Capital

  When you think of economic capital, the financial capital needed to undertake any type of enterprise is probably what comes to mind. For our purposes however, we will distinguish between three types of economic capital: financial, entrepreneurial and potential exchange capital.

  8. Financial Capital

  The financial capital available for the creation of real wealth includes the loan resources available through the banking system and the savings and investment made by individuals and institutions. Strengthening and increasing this type of capital always seems like the obvious path to successful economic development, yet by understanding the other two forms of capital, it is possible to identify other critical resources that new ventures need to get started.

  9. Entrepreneurial Capital

  The entrepreneurial capital in your community includes those businesses and organizations that mobilize all the other types of capital to produce the assets that meet human needs. Entrepreneurial capital includes both the for-profit and nonprofit sector — the manufacturers, service industry, retail shops, hospitals, daycare centers, architects, engineers, planners, beauty parlors, restaurants, amusement parks, golf courses, hotels, schools, universities, nursing homes — in short, all of the employers who put us to work. The sum total represents a critical part of the productive capacity in any community, and without it the economy wouldn’t exist.

  10. Potential Exchange Capital

  Besides the economic assets which are measured in bank-debt money (e.g., dollars, euros, pesos, yen), another form of capital that is often overlooked is capital that can be mobilized through complementary currency systems. This capital is important because it contributes to our well-being without being limited by the scarcity of bank-debt money. The word economy comes from the Greek words oikos and nomos, meaning management of a household. The functions of a household include but also go beyond those that are captured in the monetized exchanges. To truly understand our economy, we need to look beyond the value that is translated into monetary terms.

  All of these forms of capital produce the critical flows of assets through the economic system. Capital is the foundation, the reproductive system, the greenhouse that grows a healthy economy. If you picture your community as an island, and measure all the flows of money, resources, goods and services in and out of the community, it’s easier to understand how this works. If the island maintains its natural capital, so that the soils stay productive, the water remains abundant and clean, and the plants and animals are all healthy, then it can produce food for the people that live there, with possibly some extra agricultural goods or products — jams, wool, sweaters, lumber, furniture — to sell to the mainland.

  If the money from the mainland is saved in local banks (financial capital), then there are loans available to people who want to borrow to start a business. If the local schools teach people to foster their creativity and innovation and understand risks, then there might be some entrepreneurs who could figure out how to make better sweaters or furniture (entrepreneurial capital). They might charter a company (institutional capital) and work with local community leaders (social capital) to build a larger factory (built capital). A training program for the workers would help insure that there were people with the skills to make the products (human capital).

  Each asset — the skills of the workers, the incorporation papers of the company, the entrepreneurial imagination — has a base of experience and collective support behind it that allows it to reproduce itself in new ways. This is the capital base. The way all the different forms of capital work together, and the flows of different assets through a community and among different communities, form what we’ve come to know as the economic system.

  Exchange as Soc
ial Change

  Could it be that one of the most profound things we could do to foster healthy economic activity would be to use an additional medium of exchange, instead of depending on bank-debt money for all our transactions? It seems too simple to be true.

  In fact, connecting all the different needs in a community with assets available is one of the main goals of any currency. Currency — sharing the same root as the word current — makes things flow. So, consideration of how to start work on the local level designing and implementing currencies that can serve a community (as exchange mechanisms, stores of value and units of account) begins with an inventory of needs, assets and capital. This inventory would also identify those needs which are going unmet and areas where there are resources or assets which are underutilized. Unmet needs and underutilized resources are places in the system where flow is possible, but untapped. This potential exchange capital of any community is the basis for new kinds of economic flows and activity in a community. Mobilizing these flows is the essence of a community currency.

  There are at least as many different types of exchange possible in any given community as there are underutilized forms of capital. Each set of assets fills different needs and uses different resources. Flows can move between the resource base, the productive process and the consumer without money — we have simply become used to using money as the medium. And we don’t have to regress to barter — exchanges without any standardized medium — to correct this problem. We can simply introduce complementary currencies, designed to circulate in parallel with conventional money.

  Tools Available Today

  A complementary currency is an agreement to use something other than legal tender (i.e., national, or bank debt money) as a medium of exchange, with the purpose to link unmet needs with otherwise unused resources.3 Complementary currencies exist on many levels and for many purposes — consider what has happened with frequent flyer miles issued by the airline industry around the world. Initially, frequent flyer miles were only a marketing gimmick for each individual airline; they could only be used to purchase airline tickets of that specific airline. Now, fourteen trillion airline miles have been issued by five major global airline alliances — more than all the dollars or Euros combined.4 They can be earned without setting a foot in a plane (e.g., through the use of specific credit cards) and they have become redeemable not only for air travel, but for car rentals, long-distance phone services and an increasing range of products. For instance, of all British Airways miles are now cashed in for something other than an airline ticket. In short, airline miles have become a corporate scrip with a specific commercial aim — customer loyalty. They mobilize the otherwise unused resource of an empty airline seat to achieve that aim.

  Economists will correctly point out that matching needs and resources is the function of the market, even without complementary currencies. And if by the agency of some magic wand all humans on the planet suddenly had an optimal distribution of money, one could even imagine that there wouldn’t be any unmet needs. The reality is clearly different. Therefore, the starting point for complementary currencies is to meet needs that remain unfulfilled after transactions facilitated with bank-debt money have taken place. Similarly, unused resources are those that haven’t been used in economic transactions mediated by bank-debt money.

  The economics of frequent flyer miles illustrates how this process works even in strictly commercial environments. A well managed frequent flyer mile system is the one that obtains something (customer loyalty) at the cost of an unused resource (an airline seat that would otherwise remain empty). Community currencies simply extrapolate these same concepts to a broader environment, where the benefits are chosen by the participants themselves.

  An Ecology of Currencies

  As needs and resources are identified, the possibility of an ecology of currencies emerges, where different economic goals could be achieved by different types of currency, complementary to each other — not so many as to make it impossibly complex and confusing, but just enough. This is particularly true in the US, where the taxation rules around complementary currencies often require there to be different systems for different purposes.

  For example, in Montpelier, Vermont, the city started with a Time Bank system, which is a tax exempt form of community currency pioneered by Edgar Cahn, an attorney who has dedicated his life to social justice issues.5 In a Time Bank, members exchange units of time, and all members’ time is worth the same amount — an hour is an hour, whether you’re a highly skilled computer technician or a babysitter. The Time Bank is particularly useful for a wide variety of social purposes such as anti-poverty, elder care, community organizing and alternative transportation. The fact that the value of the exchanges does not count toward income (unlike barter, which is taxable) means that people can raise their standard of living without putting at risk their government benefits like food stamps, subsidized housing, daycare and medical insurance. Time Banks will be discussed further in Part II.

  Once the Time Bank was underway, the city started exploring other possible systems. The first was a commercial barter system, where companies can exchange goods and services with other companies for credits instead of money. Because this is a taxable form of currency, it cannot intermingle with the Time Bank units. If companies spend as much as they earn in commercial barter, however, the tax implications are generally negligible, since profit would have to be made on the transactions before tax would be imposed. (The US does not have a value-added tax.) The Vermont Sustainable Exchange is a new commercial barter system established in the Burlington area, so meetings were held between the Exchange and the Central Vermont Chamber of Commerce to recruit businesses in Central Vermont to the system. Commercial barter and other business purposes will be discussed further in Part III.

  Going further, the Central Vermont Food Systems Council has designed a local food currency that would foster locally grown foods and support the local restaurants that use local food, farmers, restaurant workers and food processors. While similar to commercial barter, the food currency needed to cross the lines between businesses and employees, and businesses and customers. It needed to help farmers and restaurants keep good workers by providing extra income that would help relatively low paying jobs flourish in the local economy.

  Taking a step back from these three relatively simple examples, the different flows through discrete parts of the local economy can be seen. The Time Bank fosters a social flow, where people are connecting with each other to provide a variety of different services on the basis of mutual respect and reciprocity. Commercial Barter works in the business sector to increase transactions which strengthen the buying power of local businesses and to give them an edge against larger, more vertically integrated global enterprises. This helps build local wealth and a higher level of resilience in the face of economic downturns. The Food Currency reinforces a critically important life-support system and raises the standard of living for all of the people working in the food service sector which are traditionally low-income jobs, at least in Vermont.

  All living systems manage the flows of many different kinds of energy, nourishment, waste, information and reproduction. By restricting our economy’s circulation to one type of money system we make it less resilient, at higher risk to shocks and other disturbances, and we lose a vast array of economic activity that could serve both humanity and the natural world more effectively. Creating an ecology of currencies that is more congruent with the ecological imperatives of Earth and the social and human needs of the human family can help bring the economic system back in line with the survival of our species.

  Providing a new basis to increase the flow of assets throughout the local economic system in ways that meet real needs (while enhancing generative capacities) strengthens the foundation, the reproductive system, the greenhouse of the economy called capital. In this way, community and complementary currencies create new capital by fostering other forms of capital in the economy. A curr
ency that encourages people to save energy, reduce fossil fuel use and lower emissions strengthens the natural capital of the climate regulation system and creates new capital for innovation in the energy sector. Using a local currency to link vocational trainees with houses that need renovation creates new capital in both the built environment and the human capital sectors. New capital can be created in most areas if we find new ways to unleash our creativity, interdependence and compassion outside and around the constraints national money imposes. Abundance and sufficiency are available to us, even in a finite world.

  CHAPTER 4

  The Possibility of

  Sufficiency and Abundance

  No complaint is more common

  than that of a scarcity of money.

  ADAM SMITH, THE WEALTH OF NATIONS

  We fear scarcity, the sense that there is never going to be enough for everyone. The sense of scarcity has driven human competition since the dawn of civilization — for water, for hunting territory, for women, for land. On Spaceship Earth, scarcity is a fact of life. Fossil fuels are increasingly scarce, along with sweet water, rainforests, precious metals and fine jewels. Other things will always be scarce — good pitching arms, original Rembrandts, Cliff Walk properties in Newport, operatic sopranos, true genius. When there are a lot of people who want very scarce things, the value of the scarce resource goes up relative to other resources — this is simple supply and demand economics.

  Money is also scarce. There is never enough of it for everything people need. We all are so accustomed to money being scarce that it’s hard to imagine a world where there is enough money for everyone. One of the important lessons all students learn in Economics 101 is that when money supply increases, inflation increases, so there’s a good reason for money to be scarce — we don’t want its value compromised by too much inflation. The specter of hyperinflation, when a national money system spirals out of control into ever higher denominations is a real fear associated with too much money in circulation. Zimbabwe was the first country in the 21st century to suffer from this with 231 million percent inflation.